- within Cannabis & Hemp, Coronavirus (COVID-19) and Insolvency/Bankruptcy/Re-Structuring topic(s)
A federal court recently dismissed employment discrimination claims against a franchisor asserted by its franchisees' employee after holding that the employee failed to allege facts sufficient to establish that she was an employee of the franchisor. The case is a straightforward illustration of the joint employment doctrine.
Background
In Sharp v. Arthur Murray International Inc., a dance trainer sued a franchisor of dance studios, Arthur Murray, and two of its franchisees. The trainer alleged that during her employment with one of the franchisee studios, she experienced racial and disability discrimination and was terminated after raising these concerns to her manager. After her termination, she alleged that she was transferred to a second franchisee studio, where she again faced racial discrimination and was wrongfully terminated after filing a workers' compensation claim.
The trainer filed suit against both franchisee studios and Arthur Murray, as franchisor, in the U.S. District Court for the District of Maryland for racial and disability discrimination, hostile work environment, retaliation, and wrongful termination under federal and state employment laws, including Title VII, the ADA, and the Maryland Fair Employment Practices Act (MFEPA).
Arthur Murray subsequently filed a motion to dismiss arguing that the trainer failed to allege facts establishing that it employed her.
The Court Granted the Franchisor's Motion to Dismiss
On or about October 16, 2025, the Court granted Arthur Murray's motion to dismiss. As a threshold matter, "[c]laims under Title VII, ADA, MFEPA, and for wrongful termination can only be filed against one's employer." The trainer acknowledged that Arthur Murray was a franchisor but argued that it should nonetheless be considered her employer under the joint employment doctrine.
Under the joint employment doctrine, two entities may be deemed joint employers – and therefore both potentially liable for employment law violations – if they each exercise sufficient control over the terms and conditions of an individual's employment. Specifically, courts will consider factors such as the entity's ability to hire and fire the individual, day-to-day supervision of the individual, and possession of and responsibility over their employment records. Accordingly, a franchisor may be considered a joint employer of a franchisee's employee; however, "a franchisor's expansive control over a franchisee" will not automatically create a joint employment relationship. Instead, the inquiry focuses on the franchisor's control over those matters governing the individual's employment.
Here, the trainer's complaint failed to allege facts to establish even one of the joint employment factors. The Court explained that merely asserting that Arthur Murray was her employer and naming Arthur Murray as a defendant amounted to "bare 'labels and conclusions'" that were not entitled to the assumption of truth. Moreover, the trainer's allegations that she "experienced consistent discriminatory acts at both franchisee studios" and was "terminated after filing a workers' compensation claim" did not permit the Court to discern whether Arthur Murray coordinated her termination or otherwise exerted control over her employment.
Key Takeaway
This case illustrates that a court may be unwilling to broadly classify franchisors as joint employers absent sufficient factual support. While federal pleading standards are relatively low, they still require a plaintiff to allege facts establishing that the franchisor's conduct satisfies the joint employment factors. This case also reminds franchisors to carefully evaluate their involvement in franchisees' employment relationships to limit liability.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
